Review

• Excluding those one-off RM5.8mn reversal of grant and other exceptional items, PGF Capital’s (PGF) core profit of RM12.8mn beat our expectation by 24% and we attribute this to better-than-expected operating margin. For this quarter, the company proposed a final dividend of 1.5sen/share for FY24.

• FY24 core profit rose 92.6% YoY to RM12.8mn, underpinned by 41.3% YoY increase in revenue. The rise in profit was mainly due to the proliferation of glass wool insulation demand from customers in Australia in response to the change in building codes. This more than offset a slight margin compression resulting from the depreciation of right-of-use warehouses in Australia.

• QoQ, 4Q24 core profit contracted by 7.3% on the back of a 9.0% drop in revenue. The decline in revenue was due to the seasonal effect, as demand from Australia tends to slow during the Christmas and New Year periods.

Impact

• No change to our FY25-26 earnings projections.

Outlook

• We remain optimistic about the outlook for PGF as robust demand for glass wool insulation in the Australian housing market. Its participation in the new Western Sydney International Airport project is expected to fuel FY25-26 earnings growth. Moreover, we believe the company stands a good chance of supplying insulation products for the upcoming Penang LRT project. Note that PGF supplied its glass wool products to Kajang MRT and Singapore MRT projects for roof insulation and noise barrier usage.

• As far as Automotive High Tech Valley (AHTV) is concerned, the introduction of the “Muallim Speed-Lane” initiative is expected to expedite the process of developing AHTV in Tanjung Malim. Also, the MoF has recently registered the proposed construction of a new highway that will connect Tanjung Malim to Lumut. The Menteri Besar of Perak was quoted as saying that the new highway is necessary to facilitate export logistics services through the LuMIC when AHTV begin operations. All these would bode well for PGF, given its significant 1,311- acre landbank just next to the AHTV.

Valuation

• We maintain the sum-of-parts valuation (SOP) at RM2.76/share for PGF. Maintain Buy

Source: TA Research - 2 May 2024